The Debt Ceiling: GOP Win, Finally

The GOP won the debt ceiling debate and that, my friends, is all that is important. Fighting Obama or the democrats over poultry spending cuts in order to raise the debt ceiling is a losing position. Do you think another government shutdown would help our 2014 election cycle? Hell no, it makes the GOP look like idiots, which they don’t need anymore help with. Look, I understand, probably better than most, that $17.2T in debt, the real number is higher as that $17T figure doesn’t include “intergovernmental debt” read Social Security obligations, is bad, much worse than the media says, but it had to be done.

Everyone is beating up on Boehner for passing the 1 year extension of borrowing authority with no cap but stop it. Seriously, give the man a break, he deserves it. As much as I dislike career politicians I actually feel for Boehner and you should too. He is caught between 2 worlds, the moderate and the ultra right wing GOP members. Now, the country is center right, sorry liberals, but it is which explains why Fox News beats MSNBC and CNN, combined, and the GOP will eventually move back to the center where it belongs. The problem is the Tea Party, who I identify with to a degree, elected a bunch of people who have more conviction than political sense which is a problem for all of us. Taking the extreme position ruffles the feathers of a centrist country even though we know the debt is out of control and that, my friends, is the truth.

The GOP has a tremendous opportunity to potentially, I stress potentially, take back the senate which would put conservatives in a great position. Why in the world would we risk that in order to postpone the inevitable? Do you think the debt ceiling would not be increased? Of course it would be and, therefore, holding it hostage to win nothing or at best superficial changes is pointless and gives the media weeks worth of negative stories which would surely cost the GOP votes come November, look at the 2013 Virginia elections for evidence of this.

You can either have a hollow victory now, which was unlikely given how the democrats hung on last time around, or a real victory in November or at least an honest shot at a real victory. What concessions do you think Obama would make if the GOP help out and there was another government shutdown? We don’t even have a real budget for heavens sake, we have had continuing resolutions for years now. Do you think even cutting a few billion out of a $3 trillion budget even does anything at all? No, not at all.

A hollow victory now would sacrifice real spending changes if the GOP wins in 2014.

The Debt, Long-Term

Getting real political change in 2014, i.e. the GOP takes the senate, they can impose real spending change in Washington. I would hope at least, keep in mind the last time the GOP ruled they spent like drunken sailors, although their spending was a fraction of Obama’s. In fact both parties are responsible for our whopping $17T+ in debt and neither party has a real solution for solving the problem, but, ironically, combined they do, more on that in a minute.

Every democrat uses the same argument about the debt, Bush did it first, but never in the history of the world does 2 wrongs make a right, for starters. Second, Bush’s worst deficit, excluding TARP which was a surprise, was just over $450B and Bush’s deficits were declining up until the 2008 crisis. Compare this to Obama who has ran $1T+ deficits for 4 out of the last 5 years and it is fairly obvious who spent more just with simple math. What’s worse is over obama’s 5 years he has had TARP repayments which means his deficits were even greater than reported!

Even if we look at last years $680B deficit and the president claims the deficit is shrinking the fastest in history, as compared to GDP which is a BS comparison because that means Bush’s spending excess were the slowest in history, you are being lied to. Last year the GSE, government sponsored enterprises, Freddie and Fannie, repaid about $280B of their bailout and the Federal Reserve paid about $100B on profits back to the treasury which reduced the annual deficit by about $400B. The tax increases only raised about $76B in new revenue. Therefore, spending control had nothing to do with deficit reduction.

The real problem is that deficits do matter over time. Right now when interest rates are at zero, sure, they matter less, but even at these low interest rates we still spend $250B a year, give or take, just in interest expenses. If Interest rates return to normal levels that cost will rise by 3-4 times where it is now to almost $1T which is 30% of our current budget. What does that mean? It means when rates go back to pre-crisis levels our $3T annual “budget” would increase to $4T without a penny of new spending… where will that money come from?

The government will either have to raise taxes or borrow more money to cover the rise in debt servicing costs. This debt will cost us massive amounts of money and reach levels we will never be able to reverse without massive efforts to control spending AND increase taxes, each of which are opposing parties positions. During our best years we never raised more than $3T in tax revenue and that was with record high markets, higher tax rates and full employment. What does that mean? It means we are in big trouble and the time is now to reduce spending and raise capital to reduce our outstanding debt levels.

The debt, long-term, is a problem and I do not care what Paul Krugman says, name 1 economist who has ever been right consistently. Name 1 economist that has made an accurate projections consistently. There are none because they didn’t even see the largest bubble in history coming at them, I did, I was trying to buy a house in 2006 and people wanted insane prices which led me to buy down, not up, but we are supposed to trust Krugman & Co. to tell us that deficits don’t matter… right…

Winning all of congress is all that matters, got it? So cut Boehner some slack, a lot of slack as he and McConnell did the right thing and a fight was avoided, an unnecessary fight. We have very short period of time to change our spending habits and who do you want making those changes, Obama and Harry Reid or Obama and McConnell? I know where I stand on that but I am unclear if the rest of the GOP sees this bigger picture. Obama cannot be trusted to reduce the debt as he once sent out a letter telling us cutting the private plane tax loophole would raise $300B to REDUCE the deficit, but the letter showed how those new taxes could be spent on the poor, food, housing, etc. See how he views deficit reduction?

The problem is, we will need to raise taxes and cut spending so be prepared for that. It is mathematically impossible to cut our spending to reduce the debt so we must raise taxes and cut spending at the same time. However, we must mandate all new taxes go to reducing the debt first and we must hold them to it. You can’t get mad at me for telling the truth and that truth is simple, we must all pay more now to avoid a complete collapse of the US in the future, its really that simple. Oh, I was once in the top 5% of income earners in America and now I am part of the 47% who pay nothing, but I am willing to pay for the greater good.


The Debt Ceiling: GOP Win, Finally